Strategic Resources for Your Insurance Agency

Benefits of Using an M&A Advisor



1.      You only have one opportunity to sell and once you agree on price and terms and close the transaction, the deal is done.  You have built a successful firm providing a valuable service and advocating for your client-great coverage at a competitive price with a good insurance company.  So too with a sale-you need your advocate.  It is not a “do it yourself project”.


2.      The common active buyers are fair and reasonable.  They have deep experience at their craft, and all or most have dedicated M&A teams.  They will do a good deal but their role is not as an advocate for the seller.  This is a subtle point, but it is a major subtlety nevertheless.


3.      The buyer universe is not monolithic.  Each is a little different and each has a different personality, culture and M&A mindset.  Experienced M&A advisors navigate through and identify advantages for the seller through the intricacies of the finer points of the transaction.


4.      An  advisor will facilitate the management of the entire M&A process on behalf of the seller:

·         Analysis of seller’s financial and other data.

·         Preparation of the “Profile” including “Pro Forma Income Statement” for delivery to the buyer universe.  This standardizes the information to be presented to potential buyers in a common format (they all request 95%+ of the same information but in a different format).

·         Collaboratively build a prospect list of potential buyers with client.

·         Initial contact, screening and marketing to buyer universe including execution of non-disclosure agreements.

·          Isolate the serious buyer candidates.

·         Responding to questions from buyers, supplementing Profile data and information as necessary.

·         Coordinating meetings with serious final prospective buyers.

·         Soliciting proposed terms and conditions (LOI or term sheet).

·         Clarification, as necessary, and analysis of proposals.

·         Negotiate final terms and conditions with final buyer(s) candidates.

·         Assist seller’s legal counsel with documents; assist seller’s tax counsel as necessary.

·         Assist seller with buyer’s due diligence.

·         If appropriate, due diligence on buyer.

·         Facilitate the process to and after the close.


5.      The critical starting point and key driver of value is the “Pro Forma Income Statement”.  Experienced advisors work collaboratively with their clients to establish the Pro Forma based on in-depth knowledge of the seller and to isolate the best possible value opportunities.    Generally, the buyers will not drill down as deep as the advisor to find incremental value for the seller


6.      Advisors balance advocacy with reality.  Ultimately, the challenge to deliver on the pro forma is the seller’s responsibility and the advisor will help to frame reality with the seller.

7.      Key functions of the M&A advisor:

·         Manages the seller’s expectations.  There is a plethora of slightly inaccurate anecdotal information floating around the agent-broker M&A universe.  An advisor can sort through fact and fiction for the client.

·         Offer guidance regarding transaction value and structure.

·         Identifies unique characteristics in seller’s operations through more intimate knowledge of the business that can be incorporated creatively into the negotiation of price/terms, all for the benefit of the seller.

·         Exposes the seller to multiple buyer organizations’ management, staff, and firm culture. 

·         Create separation and a buffer between seller/subsequent employee and buyer/subsequent employer on difficult or contentious matters through the negotiation process.  It is good to have both a lightning rod and shield throughout the process.

·         Provides guidance on industry M&A norms, customs and practices through extensive knowledge of market.  Shortens learning curve for seller’s legal counsel and other advisors.  Provides guidance regarding industry specific contract language and related concepts (see 4 above).

·         Motivates buyers to be slightly more aggressive in pricing and other terms and conditions. 


Explore Agency Equity


Stay up to date with AgencyEquity

absolute absolute.gif absolute